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February 17, 2012 01:00 AM

OTR CONFERENCE: OTR tire demand could match '07 peak

Bruce Davis
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    RANCHO MIRAGE, Calif. (Feb. 17, 2012) — U.S. demand for OTR tires this year should match or exceed the peak shipment year of 2007 and could grow considerably more if commercial housing recovers, according to figures presented at the 2012 Tire Industry Association Off-The-Road Tire Conference in Rancho Mirage.

    The fundamentals of the American economy are strong, but election-year politics will mean many key issues that need attention likely will be on hold, according to Angie Jones, general manager of mining and strategic services for Bridgestone Commercial Solutions, who gave the OTR sector's annual statistics review.

    Ms. Jones said the outlook for mining tires is the most optimistic, because of global demand for commodities—particularly for steel, coal, oil, etc.—to support economic growth, especially in the BRIC (Brazil, Russia, India and China) countries.

    In the U.S., mining tires account for 10 percent of OTR tire shipments but 51 percent of the value of OTR tire sector, Ms. Jones said.

    North American customers for mining tires will have to compete with international customers, creating the potential for bidding competition.

    Overall, shipments are expected to hit or exceed 300,000 units this year, split relatively equally between OE and replacement, Ms. Jones said. A high percentage of OE demand will be for vehicles destined for overseas customers.

    The outlook for construction tires—accounting for 75 percent of shipments but just 30 percent of the value—is more subdued as demand is tied to the housing industry, which is still struggling to recover, she said. To cement this link, Ms. Jones showed a chart illustrating a direct link between unemployment in the construction sector and OTR tire shipments.

    Recovery in demand for tires used in the aggregates industry will depend on a rebound in commercial real estate construction, she said, along with revived road building. The former will require the creation of at least 500,000 office jobs, she said, while the latter depends to a great degree on federal and state funding, and state funding is uncertain at the moment based on reduced tax revenues in many states.

    Ms. Jones also referenced the billions of dollars of investment committed in the past few years to new OTR tire capacity, but she did not comment on the potential impact on the supply-demand curve and eventually pricing.

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